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Alberta Electric System Operator Application for Approval of Proposed Amended Section 103.3 of the ISO Rules, AUC Decision 26908-D01-2021

Link to Decision Summarized

Market – Financial Security

In this decision, the AUC approved the application from the Alberta Electric System Operator (“AESO”) for approval of amendments to Section 103.3 Financial Security Requirements of the independent system operator (“ISO”) rules.

Proposed Changes

Section 103.3 applies to electricity market participants with financial obligations to the ISO and sets out requirements for the provision and acceptable forms of financial security, determination of financial obligations, the use of unsecured credit, and ISO review and reassessment of market participants’ financial security.

The AESO proposed amendments that will expand its flexibility to respond to market participants’ financial situations, increase its authority to mitigate risk, and clarify and streamline provisions to align with the red tape reduction initiative.

After considering an ISO rule, in accordance with subsection 20.21(1) of the Electric Utilities Act (“EUA”), the AUC may approve the ISO rule, direct the AESO to revise the ISO rule or refuse to approve the ISO rule. Section 20.9 of the EUA requires the AUC to make rules requiring the AESO to consult with parties in the development of ISO rules and permits the AUC to develop rules governing the AESO’s process in the development of those rules. Rule 017: Procedures and Process for Development of ISO Rules and Filing of ISO Rules with the Alberta Utilities Commission (“Rule 017”), is the AUC rule which was created in response to Section 20.9 of the EUA.

Main Issues

Do the Rule Amendments Meet the Criteria set out in the EUA?

The AESO filed its application pursuant to Section 20.21 of the EUA. The AUC was satisfied, based on the AESO’s explanations, that the proposed amendments to Section 103.3 are not technically deficient; support the fair, efficient and openly competitive operation of the market to which they relate; and are in the public interest, as required by Subsection 20.21(2) of the EUA.

Did the AESO Fulfill Its Obligation, Under Rule 017, to Adequately Consult With Stakeholders?

The AESO issued a letter of notice to stakeholders in March 2021 and revised Rule 103.3 in response to all comments provided by stakeholders.

The AESO submitted that stakeholders were concerned that the provision allowing the AESO to request any financial information is too broad in scope. In response, the AESO explained that it usually only requests recent financial statements. However, it requires the ability to request additional relevant information to properly assess the ongoing creditworthiness and financial security requirements of market participants.

The second issue raised by stakeholders in the consultation process was that the acceptable form of financial security should be extended to insurance bonds from investment-grade rated entities. The AESO submitted that it has an obligation to settle the wholesale electricity market. As a result, it needs forms of financial security that can be reliably and efficiently converted into cash. The AESO does not consider insurance bonds to be of sufficient liquidity and reliability and excluded insurance bonds from previous versions of Section 103.3 as well.

The AUC was satisfied that the requirements regarding information and consultation established in Rule 017 have been met. The process followed by the AUC provided enough opportunity for stakeholders to make submissions and raise concerns.


In proposing the amendments to Section 103.3, the AESO met the requirements to Section 20.21 of the EUA and Rule 017. Pursuant to Subsection 20.21(1)(a) of the EUA, the AUC approved the proposed amended Section 103.3 of the ISO rules, Financial Security Requirements.

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